The U.S. economy looks great and the impressive account on Initial Jobless Claims indicates a stellar labor force, presently. Moreover, ongoing negotiations with Canada and the indication of resumption of trade talks with China are likely to ease concerns.
Therefore, betting on the right stocks and staying out of the wrong ones is what investors should consider now. Although parking your hard-earned money in stocks based on top-line growth and increasing profit numbers might appear trendy, choosing stocks based on cash flow can be far more rewarding.
This is because even a profit-making company can face cash troubles and end up filing bankruptcy. But a company with solid cash flow can endure any market mayhem and still be on the growth curve. In fact, cash indicates a company’s true financial health. It is the key to a company’s existence, development and success. It offers the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. Moreover, cash indicates that profits are being channelized in the right direction.
To find this efficiency, one needs to consider its net cash flow figure. While in any business cash moves in and out, it is net cash flow that explains how much money the company is actually generating.
If a company is experiencing a positive cash flow then it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in business, endure downturns and finally return wealth to shareholders. On the other hand, a negative cash flow indicates a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
However, having a positive cash flow merely does not secure a company’s future growth. To ride on the growth curve, a company must have its cash flow increasing because that indicates management’s efficiency in regulating its cash movements and less dependency on outside financing for running its business.
Therefore, keep yourself abreast with the following screen to bet on stocks with rising cash flows.
To find stocks that have seen increasing cash flow over time, we ran the screen for those whose cash flow in the latest reported quarter was at least equal to or greater than the 5-year average cash flow per common share. This implies a positive trend and increasing cash over a period of time.
In addition to this we chose:
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the company’s future performance.
Current Price greater than or equal to $5: This sieves out low-priced stocks.
VGM Score of B or better: This score is also of great assistance in selecting stocks. Importantly, this scoring system helps in picking winning stocks in their individual industry categories.
Here are four out of six stocks that qualified the screening:
Johnson Outdoors Inc. (JOUT - Free Report) is a leading global outdoor recreation company that designs, manufactures and markets a portfolio of winning, consumer-preferred brands across four categories: Watercraft, Marine Electronics, Diving and Outdoor Equipment. The company is headquartered in Racine, WI and has a VGM Score of A. The stock has witnessed positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings increasing 11.4% over the last 60 days.
New Albany, OH-based Commercial Vehicle Group Inc. supplies interior systems, vision-safety solutions and other cab-related products to the global commercial vehicle market. The stock sports a VGM Score of A. The Zacks Consensus Estimate for 2018 earnings has increased 6.1% to $1.40 over the last 60 days.
Verso Corp. (VRS - Free Report) , based in Miamisburg, OH, produces coated freesheet, coated ground wood and uncoated super calendared papers and pulp. It serves to magazine and catalog publishers, commercial printers, specialty retail merchandisers and paper merchants. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for 2018 earnings has more than doubled to $2.01 from 98 cents over the last 60 days.
Turtle Beach Corp. (HEAR - Free Report) is a San Diego, CA-based audio technology company that designs audio products for consumer, commercial and healthcare markets. The company has a VGM Score of B. Turtle Beach has a projected long-term EPS growth rate of 18%. Additionally, over the past two months, the Zacks Consensus Estimate for 2018 earnings has significantly increased to $2.17 from $1.01.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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